Water companies have been given a major boost following changes in the Valuation Methodology for Business rates leading to potential savings of £26.5 million over the life of the Rating List.

Following a year of negotiations, our Rating team has agreed the 2010 Cost Guide with the Valuation Office Agency - the government agency responsible for valuing sewage works for business rates.

Significant reduction in rateable value

Gordon Mackay, Associate Director in our Rating team, said the impact of the agreement is such that it should result in a significant reduction in the rateable value for most sewage works across England and Wales.

“To put this in context, there are approximately 5,400 sewage works in England and Wales with a total Rateable Value in the order of £390,000,000. The adjustments agreed on the Cost Guide should result in a 3% reduction in most cases in the rateable value which, spread across the large number of sewage works owned by each water company, amounts to a significant saving in rates paid over the life of the 2010 list.”

Extensive research secures agreement

He said that the process for securing the agreement started two years ago when, in conjunction with the rates team at Severn Trent Water, we researched all the costs associated with items of plant found on sewage works.

“Using this information, detailed and lengthy negotiations were held with the Valuation Office whereby it was agreed to reduce the prices applied to the kiosks, gates and fencing.

“However, more significantly, agreement was reached on revising the age and obsolescence allowances for non specialised assets to be brought in-line with the allowances which are applied to industrial premises.”

Revised allowance for superfluity

He added: “Finally, also in conjunction with the rates team at Severn Trent Water, the allowance for superfluity has been revised following the measurement of flow at sites that was introduced in the AMP3 2000 – 2005 investment programme. In essence, the new Under Working Allowance uses both the consented flow and actual flow data to establish whether a works is operating at, or under capacity, which in turn is also compared with the actual and design population design data to establish if an allowance is appropriate.

“Overall, the revised age and obsolescence allowances, coupled with alterations to the prices applied to some items of plant and revised superfluity allowance, mean this is considered a good outcome for the water companies of England and Wales.

“Based on a 3% saving in rateable value, this is equivalent to a reduction of nearly £12,000,000 of the total rateable value, although we have achieved a higher percentage of savings already on some sites.”